What kinds of investments will do better because of inflation?

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Q. What kinds of investments will do better because of inflation? I’m preparing to do my twice-a-year asset allocation checkup and I’m sure I’ll need some changes given where the market has gone.
— Investor

A. We’re glad to see you’re reviewing your portfolio on a regular basis.

Just be prepared to see some losses given the stock market’s recent performance.

The first thing you should do is review where your current portfolio is relative to your target allocation, said Altair Gobo, a certified financial planner with U.S. Financial Services in Fairfield.

Your target allocation was selected based on your goals, objectives, time horizon and risk tolerance, he said.

“If your current portfolio includes active management, you need to assess how they have adjusted their investment strategy based on the current environment,” Gobo said. “Once you have an understanding of your current positioning, you can then decide how much additional exposure you would like to include in certain themes like inflation hedging, as to your inquiry.”

There are some asset classes or strategies that have historically shown to offer protection against inflation, he said.

These include commodities, such as agricultural or energy-related investments, which may have pricing power in an inflationary environment

Then there are real estate and infrastructure plays related to physical assets that typically have cash flow with price increases linked to inflation, Gobo said.

“You may also want to look at I bonds, which are interest rate-adjusted for inflation,” Gobo said. “You can only purchase a limited quantity per year.”

But right now, they are paying nearly 10%.

Before you make any moves, consider evaluating your portfolio with a financial advisor to see how adding any of these strategies would affect your overall financial plan.

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This story was originally published on July 1. 2022.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.